Causality between Foreign Direct Investment and Economic Growth in India

Foreign direct investment is considered to be a vital component of every nation's attempt towards economic development. It contributes directly to the growth, and facilitates transfer of managerial skills, besides improving global market access. On this background, the present paper investigates the causal nexus between foreign direct investment and economic growth in India. Also, the paper identifies and finds out an explanation for its association. Granger causality Test is employed to examine the causality between FDI and Economic growth in India, for which annual data from UNCTAD (United Nations Conference on Trade and Development) for the year 1995 to 2013 was used. The Granger test reveals a positive relationship from GDP to FDI